eep142_2008midterm[1] - 3 True or false Suppose there are...

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Dear EEP 142 - all: Please find below the optional midterm exam it has two pages, 5 questions total. It is a take home and is due Thursday, March 20 th 2008. Do not work with others. If I notice that you have worked together you will fail this exam. Please return to front desk person in Giannini room 207, NOT INTO MY MAILBOX, no later than 3:30 pm- 4pm of Thursday March 20th or to me in my office 226 Giannini, do not leave at my door, please turn in the problem set to the front desk or to me. If you want to solve it in this document, just email it solved back to me. best Sofia EEP 142 Industrial Organization with Applications to Agriculture and Natural Resources Midterm, due March 20th. Spring Semester 2008 (Note: When convenient you may use a graph also but clearly label axes and curves) Part A: Please answer briefly to all questions below: 1. True or false: market demand is flatter than residual demand. 2. Why are marginal costs increasing in some industries?
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Unformatted text preview: 3. True or false: Suppose there are only two firms. It is better to be a quantity leader in a Stackelberg model than a member of a cartel in a one shot market. Use a graph if you want. Part B: 4. A monopolist faces the industry demand Q=400-0.5 p and has constant marginal costs of 8, with no fixed costs. a) What is the optimal price? b) If price increases, from price at a), by one cent, would total revenue be higher? 1 5. Consider the market with two firms where firms are choosing prices p 1 and p 2 and have demands q 1 and q 2 given by q 1 = 40 - 0.5 p 1 + p 2 q 2 = 60 - 2 p 2 + p 1 a) Assuming zero marginal and fixed costs, what are the firms' best response functions, that is best price of firm 1 given price of firm 2, and best price of firm 2 given price of firm one. b) What are the equilibrium levels of output, price and profits? c) Why do firms get different profits? Don't they have the same costs? Please explain. 2...
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This note was uploaded on 11/16/2008 for the course ECON 142 taught by Professor Weber during the Spring '08 term at Berkeley.

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eep142_2008midterm[1] - 3 True or false Suppose there are...

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